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Rakon's new frontier: The Internet of Things

Component maker Rakon is back in growth mode, divesting commodity businesses and focusing on the next big thing.

Investors in New Zealand-based GPS and telecommunications component manufacturer Rakon have had a rough ride in recent years, but there are signs the company can still live up to its early promise.

In a review (PDF) of 2015, Rakon is hinting at what it describes as a "soon to be released new technology proposition" and signalling it intends to grab a chunk of emerging opportunities presented by the internet of things (IoT).

Selling and closing some of its international operations to centralise production in New Zealand paid off for Rakon, helping to push the company back to a small profit for the year ended 31 March.

As a developer of crystal frequency control and timing technologies, Rakon is exposed to some high-growth communications markets, including the worldwide roll-out of 4G. Its components are used in wired, wireless and fibre networks, navigation devices, military systems and satellites.

Rakon said the applications of its technologies in support of the IoT are multiple, including wireless control, machine to machine, smart grids and test and measurement.

"As the 'Internet of Things' continues to grow toward the estimate of 50 billion things connected by the year 2020, Rakon's opportunities are significant," said chairman Bryan Mogridge.

"Our goal is to have the smartest products continually at the head of the demand curve, before price reductions set in and to ensure that we are continually superseding the current products used."

Other emerging opportunities abound.

"With autonomous cars soon becoming a reality, accuracy and dependability of the GPS sensor is essential, playing to Rakon's strengths," the company said in an investor presentation (PDF). "GPS technology embedded into sports cameras and consumer drones promises high volume demand in the future."

Even developments such as high-frequency trading appear to be playing to Rakon's strengths. Financial transactions require precise timing, the company said, and the supporting network infrastructure has legally binding accuracy requirements.

"Accuracy requirements are now less than a microsecond."

Rakon appears to be learning from its mistakes and the big bets it made in acquiring manufacturers of commodity components, mainly for the smartphone market, a few years ago. As an exporter it is also benefiting from a rapid fall in the value of the New Zealand dollar.

"The last few years have been a difficult period for Rakon and for you our shareholders," long-term chief executive Brent Robinson said.

"Within the company there is an invigorated feel from the improvements that we are showing in our results and I believe we now have the platform to develop this next phase for Rakon - growing profits."